If, as expected, the GOP controls both the House and Senate next year, the risks and challenges of the 2025 tax bill have become a bit clearer. Here is a run-down.

All-Republican control of Congress means the massive 2025-2026 tax bill will tilt towards tax cuts for all, although deficit concerns mean offsetting new revenue will also be a factor. Here is what the issues look like now:

• Expiring current law individual/estate tax rules: The risk of higher individual and capital gains tax rates for high-income individuals is lower under a GOP-controlled Congress.

• A higher corporate tax rate is less likely, and the potential for an even lower corporate tax rate is higher.

• Extension (without additional limitations) of the section 199A deduction for qualifying noncorporate business income is more likely.

• The risk of adverse changes to estate tax and trust rules is now lower.

• Democrats’ “tax-the-rich” proposals—including imposition of tax on ultra-wealthy individuals’ unrealized investment gains—are less likely to prevail, although they will be offered.

• An effort to roll-back in Affordable Care Act (ACA) premium tax credits seems likely.

There will be a very large (well north of $5 trillion) tax package debated, likely to start early in the new year, and the debate will include a plethora of new tax proposals. On the campaign trail, President-Elect Trump called for tax-free Social Security income, tips income, overtime pay, and first responder income. He also said he favors a deduction for car loan interest, and a family caregiver tax credit. All these (and possibly more) proposals will be in the 2025 tax bill discussion.

However, there are risks, and they are big ones. The federal deficit is near $2 trillion right now, and the federal debt is well above $35 trillion. Both President-Elect Trump and Congress will look at ways to reduce these numbers, or at least not to add to them in the upcoming tax bill. So, expect offset proposals.

One very big potential offset is the Trump suggestion to increase tariffs on imported goods, especially those coming in from China. However, for revenue from tariffs to count in scoring a tax bill, there would have to be a change in House rules and potentially legislative action. Most insiders believe that under current law, the President has the authority to increase tariffs without Congressional action, but for the increase in tariffs to count as offsets to the tax bill, there likely would be the need for legislation to codify the tariffs. That will trigger controversy early in the new year.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Senior Director – Government Relations, at mhedge@naifa.org